Correlation Between Ashland Global and Element Solutions

Can any of the company-specific risk be diversified away by investing in both Ashland Global and Element Solutions at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Ashland Global and Element Solutions into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ashland Global Holdings and Element Solutions, you can compare the effects of market volatilities on Ashland Global and Element Solutions and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Ashland Global with a short position of Element Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ashland Global and Element Solutions.

Diversification Opportunities for Ashland Global and Element Solutions

0.48

Correlation Coefficient

Ashland Global  Element Solutions

Very weak diversification

The 3 months correlation between Ashland and Element is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Ashland Global Holdings and Element Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Element Solutions and Ashland Global is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Ashland Global Holdings are associated (or correlated) with Element Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Element Solutions has no effect on the direction of Ashland Global i.e., Ashland Global and Element Solutions go up and down completely randomly.

Pair Corralation between Ashland Global and Element Solutions

Considering the 90-day investment horizon Ashland Global Holdings is expected to generate 0.67 times more return on investment than Element Solutions. However, Ashland Global Holdings is 1.49 times less risky than Element Solutions. It trades about 0.26 of its potential returns per unit of risk. Element Solutions is currently generating about -0.1 per unit of risk. If you would invest  9,357  in Ashland Global Holdings on February 14, 2024 and sell it today you would earn a total of  448.00  from holding Ashland Global Holdings or generate 4.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Ashland Global Holdings  vs.  Element Solutions

Ashland Global Holdings

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ashland Global Holdings are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, Ashland Global may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Element Solutions

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Element Solutions are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Element Solutions is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Ashland Global and Element Solutions

The main advantage of trading using opposite Ashland Global and Element Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ashland Global position performs unexpectedly, Element Solutions can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Element Solutions will offset losses from the drop in Element Solutions' long position.

The idea behind Ashland Global Holdings and Element Solutions pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.